The Warburgs

by Ron Chernow

  In taking over E. M. Warburg, Pincus didn’t know that he had signed on for a package that included the formidable, tempestuous Siegmund. Eric always complained about Siegmund’s meddling, yet encouraged his involvement. As Eric told Siegmund in 1961, “I am most anxious that we should work very closely together not only in Hamburg but everywhere.”18 If there were wounds, there was also resilience in their relationship. Like old punch-drunk prizefighters, they could fight, make peace, and live to fight again. Once, in the early 1960s, Siegmund—to general amazement—kept Eric waiting the entire day in his London office.19 Eric, in turn, was the one of the few who dared to twit the sensitive Siegmund. However much Siegmund scorned Eric, he was the only Warburg he stayed in touch with. He still saw Eric as weak, vain, and prone to grandiose statements. He would say dismissively, “Oh, he’s not serious.”20 Eric, in turn, saw Siegmund as conniving, completely insincere, and power-hungry. Yet lashed together by the Warburg name, they still trudged along together.

  Siegmund’s colleagues believe that by the 1960s Eric was terribly envious of what Siegmund had done in London, while his own firm had fizzled in New York. Loosely speaking, Siegmund had a dual agenda with Eric: to erase the E. M. Warburg name on Wall Street and clear the way for the S. G. Warburg name. At the same time, he wanted Eric to restore the M. M. Warburg name in Hamburg, undoubtedly as a prelude to S. G. Warburg & Co. taking over afterward. As with all Eric-Siegmund dealings, their battle over the Warburg name in New York became convoluted, theatrical, byzantine, producing hurt feelings. Once again, the name debate was a proxy for the deeper and more delicate question of who was rightful heir to the Warburg throne.

  As early as 1961, Siegmund was firing salvoes at Eric to drop the Warburg name in New York, saying he didn’t see how Eric could surrender voting control and still allow his name to be associated with a firm. “It would seem to me a sort of prostitution of the name,” said Siegmund, pointing out that he had voting control in London through Warburg Continuation Limited.21 After the fuss over the Warburg name in London and Hamburg, Siegmund was appalled that Eric might sell it in New York. Yet this is precisely what Eric did, to Lionel Pincus.

  Eric was in a bind. The major value of E. M. Warburg was its name. Lionel Pincus knew full well that he was purchasing classy, old-money cachet. On the other hand, Eric had promised Siegmund to withdraw his name from E. M. Warburg & Co. Complicating matters was that Siegmund thought Pincus the wrong kind of Jew—of Eastern European ancestry, with a garment-district background. Professionally, he thought Pincus well below haute banque stature in the venture capital world. At that point, the Pincus résumé wasn’t likely to impress Siegmund.

  Contending that Eric was cheapening the Warburg name (not to mention thwarting his own Wall Street plans), Siegmund directed a steady stream of letters and emissaries to Eric and Pincus. For Siegmund, the persistence of the E. M. Warburg name was an intolerable irritant. Each year, he would photocopy a page of the Manhattan telephone directory and send it to Eric, circling the E. M. Warburg name and asking why it remained. Outwardly Pincus found Siegmund and Eric correct with each other, if disgusted underneath. After a deftly orchestrated campaign of hints, bluffs, and demands, Siegmund finally got the name changed in January 1970 to E. M. Warburg, Pincus & Company to differentiate it from S. G. Warburg & Company. But for several years, Siegmund and Pincus didn’t speak.

  In the end, Lionel Pincus had the last laugh on Siegmund. He expanded Eric’s tiny firm into a gigantic, thriving business, with three and a half billion dollars in venture capital partnerships. He became a philanthropist and Park Avenue socialite into the bargain. Despite his own, superior contribution to the firm, Pincus never dropped the Warburg name and always proudly displayed a painting of Eric in his reception area. He knew the meaning of gratitude and he had learned to value the Warburg name.

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  The Hamburg crusade to restore the M. M. Warburg name bound not only Siegmund and Eric, but the entire Warburg family. For their first three years, Brinckmann and Eric tactfully avoided the subject. Then, in June 1960, they sat down again to thrash the matter out. For forty years before, Eric said, they had been like brothers, but the three years of silence about the name change had introduced insincerity. Eric noted the irony that Hamburg now had a street named for the Warburgs, “but in the Ferdinandstrasse that wasn’t the case and the situation has become unbearable for me.”22 When Eric suggested M. M. Warburg, Brinckmann & Co., Brinckmann refused. He was a prickly foe and Eric didn’t relish confrontation. Whenever Eric broached the name issue, Brinckmann always said it was an inappropriate time. Stingy and moody, Brinckmann had a rigid style; employees who wished to see him about a loan had to make appointments two weeks in advance. Relations between Eric and Brinckmann steadily worsened.

  Unable to talk to his own partner, Eric, in desperation, wrote to Brinckmann that autumn while the latter vacationed in Sicily. He noted that his son, Max, age twelve, was now in school in Germany, which made it far more likely that he would someday enter the bank as a sixth-generation Warburg. Eric no longer hedged his words: “Should the name extinguished by the Nazis really remain blotted out? But that can’t be your answer.… To put up with that further would be an impiety that I couldn’t justify to my entire family, and above all someday to my son.”23 He asked Brinckmann for his Stellungnahme—his opinion. The hot-tempered Brinckmann blamed Eric for spoiling his vacation and objected to the legalistic tone of the term Stellungnahme.24 His position was now hardening by the day and he demanded that the firm, if renamed, should be called Brinckmann, Warburg & Co.25

  It fell to Siegmund to step up pressure. In 1960, enraged by Brinckmann’s arrogance, he began a systematic campaign to force the name change. When he met with Brinckmann, he might begin with highfalutin talk about Nietzsche or a solemn discourse about the Hamlet enigma. Then, in his inimitable way, he would graciously, but firmly, steer the discussion around to the name change. In “Dear Brinckie!” letters, he artfully mixed flattery and threats. In a March 1960 letter, Siegmund graciously said that nobody was a better friend of the Jews than Brinckie. Then he noted, in a tone of deep regret, that every week somebody asked him why—now that Eric had returned—the original name hadn’t been revived. Finally, slipping off the velvet gloves, Siegmund said bluntly that “some people” suggested that Brinckmann hesitated for fear of offending latent Nazi sentiment.26 The fat was in the fire.

  When Brinckmann suggested that the name be changed to Brinckmann, Wirtz-M. M. Warburg & Co., Siegmund hit the roof. Fearing compromise, he warned Eric that only two names—M. M. Warburg & Co. or M. M. Warburg, Brinckmann, & Co.—were acceptable. “If one flouts the conventions for reasons of expediency or tactics, one exposes the firm in question to just the kind of ridicule and undignified comment which one wants to counteract.”27 At bottom, Siegmund wanted plain M. M. Warburg & Co. Eric thought that desirable but unattainable and was prepared to compromise on M. M. Warburg, Brinckmann & Co.28

  In the summer of 1960, Siegmund visited Hamburg to engage in verbal duels with Brinckmann. Brinckmann noted that he had urged Eric to move back after the war and restore the name, but that Eric had refused. In matters of honor, Siegmund rejoined, no statute of limitations applied. When Brinckmann pointed out that the Warburgs had failed to exercise their option to increase their stake to 50 percent by 1953, Siegmund refreshed his memory about Schilling’s savage opposition to Eric.29

  On that or another trip to Hamburg, Siegmund received a surprise invitation from Dr. Hjalmar Schacht, who had set up a financial boutique in Hamburg. It must have been with philosophic curiosity that Siegmund, now the lord of the London financial world, went to see the quondam wizard of the Nazi economy. Siegmund listened politely while a nervous Schacht prattled on about a proposal for a financial operation in the Philippines. Groveling before Siegmund, he kept interrupting his own long-winded speech to say apologetically, “In short,” as if he were taking up too much of a great man’s time. Siegmund promised to
think over the proposal but never did.30

  When Brinckmann proposed making his son, Christian, a bank partner, it confirmed Siegmund’s fear that Brinckmann had delusions about initiating his own banking dynasty.31 The Warburgs thought Christian a mediocre banker and Siegmund, to slow the move, suggested that Christian first become a holder of the power of attorney. To Siegmund’s mind, they had coddled Brinckmann for too long. For fifteen years, he told Eric, Brinckmann had “been surrounded by yes-men” and was “inclined to take the attitude that anybody who does not agree with him is unfriendly, or ‘treulos,’ or lacking in kindness.”32 It grated on Siegmund when Brinckmann said he had inherited the shell of a bank in 1938, whereas Siegmund believed he had taken over a firm with a superlative name and excellent earning power. Siegmund pointed out to him that more than two thirds of Brinckmann, Wirtz’s reserves dated from the old firm—the bank building, plus stakes in Beiersdorf and Karstadt.33 In letters to Eric, Siegmund described Brinckmann as vicious, senile, ruthless, and bullying.34 Brinckmann, in turn, dropped all pretense of civility, muttering to visitors that the Warburgs should be grateful to him, not vice versa.35

  Both Siegmund and Eric probably underrated the stubborn cunning and resourcefulness of their old retainer. At a dramatic board meeting in March 1961, Siegmund and Eric watched as key members, heavily lobbied by Brinckmann, voted a partnership for Christian.36 The Warburgs somewhat offset this by arguing for a second junior partner, Dr. Hans Wuttke, a smart car-industry veteran from Daimler-Benz, who believed that the Warburg name would open doors overseas.37 A handsome, charming character, known as Prince Benz, Wuttke would serve as Siegmund’s man in Germany. Eric, in time, would come to regard him as Siegmund’s spy.

  All this jockeying led to an angry stalemate between Eric and Brinckmann, and they simply stopped talking to each other. At the morning meeting of senior people, they saw each other for fifteen minutes, then withdrew to their offices and didn’t speak for the rest of the day. A credulous business press swallowed the public relations line that all was well between the Brinckmann and Warburg families. As the Financial Times said of Brinckmann in 1966, he “regarded himself as more of a custodian than the Nazis would have liked, and relations with the Warburgs have been fairly warm since the war.”38

  Among the Warburgs, the name issue never died. Lola and Rudo thought the idea of Brinckmann, Warburg & Co. a terrible slap in the face.39 Many notables in the German banking world, including Hermann Abs, considered the Brinckmann, Wirtz name a scandal.40 Eric even recruited Fabian von Schlabrendorff to reason with Brinckmann. One day in February 1963, Jakob Wallenberg stopped by to lunch with Eric and commiserated over the name, pointing out that Pferdemenges & Co. had reverted to Sal. Oppenheim Jr. & Company in 1947. Dr. Robert Pferdemenges, a gentile employe, had taken over the Cologne bank in 1938, but had written to all of the bank’s clients in 1947, informing them that the original name had been restored. Brinckmann had the misfortune to stop by at that moment and say hello to Wallenberg. “Do you know, Dr. Brinckmann,” said Wallenberg, “I was a little boy when my father first took me along to this house in the year 1913. And you know, the name of the firm was then M. M. Warburg & Co. and not, as today, Brinckmann, Wirtz & Co.”41 Fortified by such loyalty, Eric began to champion the unadulterated name, M. M. Warburg & Co.42

  Despairing of appeals to Brinckmann’s honor, Siegmund decided to argue the name question on purely practical grounds: the Warburg name was better for business.43 In July 1963, strolling with Brinckmann by the Alster Lake, Siegmund reminded him that the Warburg name had existed for 143 years, the Brinckmann name for only 22 years. Moreover, the Warburg name would aid the bank overseas and get it into syndicates of the sort Siegmund was now assembling in London.44 The Brinckmann family saw history quite differently. Christian told Eric that his father, not the Warburgs, had built up almost all of the bank’s foreign connections.45 In 1964, in a last-ditch effort, the Warburgs tried in vain to get Brinckmann to retire at age seventy-five. By this point, Siegmund said he could scarcely stand to be in the same room with him.46

  Aside from matters of honor, Brinckmann’s peevish obstinacy was also foiling Siegmund’s master plan for a London-based financial empire, with major subsidiaries in New York and Hamburg. Siegmund boldly decided to open another front in Germany. In July 1964, without consulting his Hamburg partners, Siegmund announced that he had taken a majority interest in the private Frankfurt bank of Hans. W. Petersen. It was run by a bluff, easy-going man named Richard Daus who had been in the wartime tanks corps. Siegmund renamed the firm S. G. Warburg & Co. Suddenly, for the first time since Hitler, the Warburg name had returned to Germany—but in Frankfurt instead of Hamburg.

  Since Siegmund sat on the Brinckmann, Wirtz finance committee, this news hit the bank like a thunderclap. While Eric defended Siegmund, Christian Brinckmann spied a secret strategy at work. He thought Siegmund would use the Frankfurt firm as a beachhead to conquer the Hamburg bank.47 Indeed, Siegmund viewed Hans W. Petersen as an instrument to dominate M. M. Warburg, with the long-term aim of possibly folding it and the Hamburg firm into a major German bank named M. M. Warburg & Co.48

  Soon after his bombshell announcement, Siegmund invited the Hamburg firm to take a stake in Frankfurt. Some Hamburg partners suspected a trap but Eric and Dr. Hans Wuttke belatedly became partners in the Frankfurt bank in 1966. In their lifelong minuet, this foreshadowed closer ties between Siegmund and Eric. As the Financial Times said, “For Siegmund Warburg the Hamburg-Frankfurt entente is part of a plan inspired as much by family feeling as by bankerly ambition—he would like the House of Warburg once again to be the power in Germany it was before the war.”49

  In January 1970, two events altered the German landscape for the Warburgs. Siegmund merged the tiny Hans W. Petersen with another acquisition, the Deutsche Effecten und Wechsel Bank in Frankfurt, which was ten times its size. The new entity was christened Effectenbank-Warburg AG, with a stake reserved for Brinckmann, Wirtz. It was controlled by a holding company in which Siegmund’s London firm had a 51 percent stake and Eric’s Hamburg firm a 25 percent stake. But Siegmund, characteristically, negotiated a deal by which he kept the voting rights. Still hoping to forge a Warburg colossus, Siegmund drafted Eric and Hans Wuttke onto the board of his London firm, giving him German strength unmatched by any other London banker. Richard Daus of Hans W. Petersen didn’t want to be merged, so he left to form his own firm. Though Daus had been extremely proud to be part of the Warburg empire, Siegmund dismissed him as a lightweight and cast him off.

  Despite his bold move in Frankfurt, Siegmund retained a sentimental attachment to the Hamburg bank. The city’s largest private bank and the third largest in Germany, the ancestral bank on the Ferdinandstrasse remained a great prize. In January 1970, the long-running struggle waged by Eric and Siegmund paid off. Now eighty-one, quite deaf and weakened by age, Brinckmann caved in on the name issue after being subjected to enormous pressure. He agreed to rename the firm M. M. Warburg-Brinckmann, Wirtz & Co. When the name was formally changed on January 5, 1970, Eric made a little speech and cited his father’s farewell speech of May 1938. Even as the Warburgs rejoiced, The Times of London noted, “The Brinckmann family, headed by octogenarian Dr. Rudolf Brinckmann, did not welcome a change in the name of the Hamburg bank.”50 Elated by victory, Eric and Siegmund tightened their links, the Hamburg bank taking a 22 percent interest in S. G. Warburg & Co. International Holdings.

  By this point, Eric was seventy-one, but the feud between the Warburgs and the Brinckmanns never faded. In the early 1970s, Eric commissioned Dr. Eduard Rosenbaum and A. Joshua Sherman to write a history of the Warburg bank from 1798 to 1938. Brinckmann resented the insinuation that history had somehow ended in 1938. When Rosenbaum and Sherman lunched at the bank, Brinckmann sat, indignant and alone, at the other end of the long mahogany table, while Eric, in his good-natured way, tried to smooth things over.51 The Warburgs and Brinckmanns kept up the facade of harmony. In January 1973, when the f
irm celebrated its 175th birthday, a press release thanked Brinckmann for guiding the bank during the war and early postwar years.52

  On the last day of 1973, Rudolf Brinckmann, age eighty-four, ended fifty-four eventful years with the bank and formally resigned. He planned a valedictory address to the staff on January 3, 1974. On January 2, Eric suggested that Brinckmann and he attend together one last reception at the Hamburg branch of the Bundesbank. It was a fine, conciliatory gesture, designed to show they had parted on friendly terms. So on a cold, crisp day, Eric and Rio, who had shared such a long and curious history, set off on foot together for the noon reception a few blocks away. As they crossed the plaza before the Town Hall, Rudolf Brinckmann had a sudden heart attack, collapsed, and died in the embrace of his ancient adversary, Eric Warburg.

  Of all the acts of forgiveness that Eric had carried out over the years, few could have been as hard as paying tribute to the gruff, testy Brinckmann. On January 15, Eric gathered the four hundred bank employees in the same canteen in which his father had handed over the reins to Brinckmann thirty-six years before. If there was some vanity in Eric’s nature, there was no pettiness, and he gave Brinckmann his due. “The trust that those forced to emigrate placed in him with the handing over of the firm, he more than fulfilled.” Eric alluded to “the years of reconstruction, where he truly had to begin from scratch.”53 Those who knew the whole story knew how much anguish Eric had to repress. In death he praised Brinckmann more robustly than he ever had been able to in life.

  CHAPTER 46

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